Tucson Investor Makes $17M Apt. Buy

CASA GRANDE, AZ-HSL Properties of Tucson has acquired the 323-unit Desert Sands Apartments for $16.8 million from Desert Sands Apartments LLC.

Located at 720 W. O’Neil Dr., the class A, garden-style community is the first acquisition the firm has made in Casa Grande, although it has been actively seeking opportunities in Tucson and Phoenix markets, according to Omar Mireles, executive vice president of HSL Properties.

Mireles tells GlobeSt. that while Casa Grande is a tertiary market, HSL Properties believes it is an area that will experience very significant growth in the long term. Moreover, Desert Sands Apartments currently is underperforming the market’s average occupancy by more than 10 percent, reporting an occupancy rate of 74 percent at purchase time despite its positioning as one of the top two apartment communities in the market.

“We have a great opportunity to vastly improve the property’s performance in a relatively quick timeframe,” Mireles says. “The property is a newly constructed, high-quality apartment community that we were able to acquire well below replacement value.”

Constructed in 2008, Desert Sands Apartments has a mix of one, two, and three-bedroom units ranging from 664 square feet to 1,042 square feet. Rents range from $638 to $835 per month.

HSL Properties obtained a $12.88 million loan from JP Morgan Chase, Mireles notes, adding that the loan was in essence an assumption of the financing that the seller had in place. “Lastly, we were able to place a very attractive bridge loan on the property that enabled us to leverage almost 77% of the acquisition,” he says.

As with HSL Properties’ other recent acquisitions, the firm plans to hold Desert Sands Apartments for the long-term (five to 10 plus years), Mireles says. “Of course, if the right offer comes along, we will take a serious look at it, but we are going into this investment with long-term operating cash flow expectations,” he explains.

Art Wadlund of Hendricks & Partners’ Tucson office represented the seller in the transaction.